Ohio Court Sides with Restaurant Group in Business Interruption Insurance Lawsuit

Feb 15, 2021

The U.S. District Court for the Northern District of Ohio recently ruled in the case of Henderson Road Restaurant Systems, Inc. vs. Zurich American Insurance Company, that the restaurant group is entitled to business interruption insurance coverage due to lost sales and increasing expenditures as a result of a government-ordered shutdown. Business interruption insurance has been widely disputed during the COVID-19 pandemic as many business owners have sought compensation for losses incurred during government-imposed shutdowns and curfews. The court ruled in favor of the restaurant group claiming it had a valid claim even though a provision within the policy denied coverage for any shutdowns caused by a microorganism. The Court argued the government orders were what caused the shutdown, not the actual novel coronavirus. Thus, the microorganism provision does not prevent the repayment.

In its defense, the insurer argued the restaurant group did not satisfy the requirement within the policy stating business income loss must be tied to “a direct physical loss of or damage to”. However, the court agreed with the restaurant group noting it lost its ability to use the insured properties for their intended purpose. The judge maintained the temporary state and local closure orders led to the restaurant group to suffer a covered loss because the orders prohibited them from allowing in-person dining, which was the foundation of their business model.

The case has been certified for an immediate appeal. If the court’s decision survives the appeal, all businesses in Ohio closed due to shutdown orders may be entitled to recover some form of their losses from their insurer. Policyholders and insurers in Ohio await a resolution of these key issues and will look for clarification of the policy interpretation rules by the Sixth Circuit or the Ohio Supreme Court.

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Categories: COVID-19, Restaurant & Hospitality

Restaurant Employee Relief Fund

Mar 31, 2020

The National Restaurant Association has created the Restaurant Employee Relief Fund to help aid employees who are experiencing hardship during the COVID-19 outbreak. This fund will offer grants to restaurant industry employees who have experienced financial hardship from either loss of employment or a decrease in wages. The grants will be awarded to individuals on a first-come, first-served basis while funds are available. Restaurant employees can apply for the grants beginning on April 2, 2020.

Employees that are eligible to receive grants must meet the following criteria:

  • Individuals must have worked on a part or full-time basis in the restaurant industry for at least 90 days in the past year; and
  • Individuals must have had their primary source of income be from working in the restaurant industry for the last year; and
  • Individuals must have experienced a decrease in wages or a job loss on or after March 10, 2020; and
  • Individuals must live in the United States, an overseas U.S. military base, or a U.S. territory; and
  • Individuals must be over the age of legal majority in their U.S. state or territory.

The $500 on-time grants are meant to help offset the financial burden that many restaurant employees are experiencing during the COVID-19 outbreak. Listed below are many of these expenses:

  • Home rent or mortgage
  • Car payments or other transportation costs
  • Utility bills
  • Student loan payments
  • Child Care expenses
  • Groceries
  • Medical bills

The National Restaurant Association, in conjunction with Guy Fieri, kicked off this relief campaign on Friday, March 27, 2020. The campaign has already raised $5.5 million for restaurant employees and 100% of the funds will be used to help these employees. There are numerous other founding partners of this relief effort including, PepsiCo and Uber Eats to name just a few. It is estimated between 5 to 7 million restaurant workers may become unemployed as a result of the COVID-19 outbreak. The restaurant industry, with over 1 million restaurants in the U.S., employs approximately 15 million people. Eligible workers can apply for aid by clicking here.

If you want to help make a difference in the lives of these workers? You can donate to the fund here.

Categories: Restaurant & Hospitality

Third-Party and In-House Delivery Risks, Costs & Opportunities

Mar 10, 2020

We’ve all seen or heard the commercials.  “[Insert insurance company name here] can save you tons of money and solve all of your insurance problems and needs.”  These commercials are usually clever and memorable.

For restaurants, considering insurance and liability when doing business with third-party delivery systems is often overlooked.  If your third-party delivery driver gets into an accident, do you know who is liable?

Most of you are aware of the financial struggles and inherent problems with third-party delivery programs. Restaurant operators are often faced with an array of challenges and must consider retaking control of the risks and rewards of their delivery operations.

Footing the Bill: Third-Party and Corporate Managed Delivery Risks

Businesses that hire third-party delivery providers need to be careful about the scope of the agreement. Restaurant owners take on huge liability when using third-party vendors. Many businesses using independent contractors (in this case, third-party delivery drivers) only discover this possible liability after a serious accident when it’s oftentimes too late.  The number one cause of workplace fatalities continues to be vehicle collisions, according to the National Safety Council.  Whether it’s an owned or non-owned vehicle, the risk for auto liability losses remains high.[1]

Third-Party & In-House Delivery Risks, Costs, and Opportunities

Though third-party delivery is new and shiny, make sure to read the fine print.  The contracts are not friendly to restaurants. Many contracts will state that the third-party is only the supplier of software to connect with a delivery partner and therefore, it assumes no liability if something happens when food is sent through that delivery partner.[1]

Traditional insurance products base premiums on industry averages regardless of the company’s liability profile.  As a result, little can be done to reduce costs and increase the bottom line.  Businesses must reassess the inherent risks, costs, and opportunities of a third-party delivery program versus an in-house program.

Adjusting the Recipe: Delivery Program with a New Platform

A new insurance platform and smartphone application, RoadWise, offers a solution for businesses to pay premiums based on actual miles driven.  Even better, there is no costly equipment to purchase.  RoadWise is an app that is installed on the delivery driver’s smartphone.

Measuring out the Technological Ingredients

RoadWise sends driver analytical data to a dashboard for management review.  The creators cite that the application is powerful enough to detect speeding, hard braking, rapid acceleration, unsafe maneuvering, and phone usage while driving.  Based on these results, it calculates a driving score that can be used to manage delivery drivers based on actual behavior.  The touted benefits include safer driving habits, increased safety awareness, reduced risks and liability, improved customer experience, and lower premiums through actual experience.

This pay-as-you-go platform also has geofencing capabilities to spot when a driver goes outside of the delivery boundaries or takes an unexpected or sub-optimal route.  The insurance is active for both the company and the employee if the application is running.  This new technology and insurance platform will go live on January 1, 2020, and more information is available at www.roadwiseinsurance.com.

Think back to one of those insurance commercials we discussed earlier.  It’s difficult to fully understand an insurance policy from a short commercial, but the take away here is that you have options to help your restaurant’s bottom line.  Cheers to minimizing risk, increasing profits, and taking back control of your operations!

About the Authors:

Amy Slates, CPA, CGMA is a Senior Manager with William Vaughan Company where she serves as the firm’s professional service practice leader. Amy has extensive advisory experience guiding her insurance and law firm clients through the myriad of challenges created by a growing technology-centric world. Her intimate industry knowledge allows her to deliver solutions that fit her clients’ needs and best position them for the future. For more information, visit www.wvco.com or contact her at amy.slates@wvco.com.

James Bailey, CPA, Senior Manager, leads Adams, Brown, Beran & Ball, Chtd.’s Restaurant Industry niche.  With over fifteen years of public accounting and restaurant consulting experience, he strategizes with ABBB’s Restaurant clients on the unique challenges they face. Additionally, James is a keen researcher of cutting-edge technologies in the industry.  For more information, visit www.abbb.com or contact him at jbailey@abbb.com.

Categories: Restaurant & Hospitality